U.S. Joins False Claims Lawsuit Against Texas Career College

Submitted by Doug Lederman on February 29, 2012 - 3:00am

The U.S. Justice Department announced Tuesday[1] that the government would join a lawsuit in which former employees of American Commercial College, Inc., allege that the for-profit college chain falsely asserted its compliance with federal requirements that it derive at least 10 percent of its revenues from sources other than federal student aid. The class action was brought under the federal False Claims Act, which allows individuals to bring lawsuits on behalf of the federal government, claiming that the defendants have defrauded the treasury of funds and hoping to be joined by the U.S. Justice Department. The plaintiff shares in any financial penalties, which can include trebled damages.

For-profit higher education providers have been a target of numerous False Claims Act lawsuits, and the federal government has joined several of them, including a high-profile case[3] involving Education Management Corp. Some have speculated that the Obama administration -- which has toughened its oversight of the career college sector through regulation -- is increasingly turning to the courts to do so as well.

In announcing Tuesday's intervention, Tony West, assistant attorney general of the Justice Department’s civil division, said: “Colleges and universities that receive federal funds must be honest with the government and follow the law.... We will use the False Claims Act and other tools to protect students and taxpayers from for-profit institutions that fail to measure up to that standard.”